Low cost carriers force European flag carriers to rethink short-haul product

Europe’s legacy carriers have long found low-cost airlines a nuisance, but the recession has turned them into a serious problem, as both business and leisure travelers trade down to cheaper tickets. Furthermore, airlines such as Air France and Iberia also face strong competition from high-speed trains. In order to stay competitive on short-haul routes, Europe’s ‘Big Three’ are rethinking their product offering in order to drive down unit costs.

The latest news comes from Lufthansa, which will introduce denser seating in its European economy class next year. To free up more ‘knee space’ for passengers, the seat back pocket will be elevated at the same time. Lufthansa also wants to simplify its catering (it currently serves six different options, depending on the type of flight and time of day), which will allow It to reduce the space needed for kitchens onboard. The airline says “the aim is that Lufthansa becomes more profitable and less complex,” and is reportedly targeting a 40 percent reduction in costs on its European network.

In April 2010, Air France will reposition its short- and medium haul product into two main cabin segments: Premium and Voyageur. Premium will seat both business class and full-flexible economy passengers, while Voyageur will seat those traveling on low economy fares with little flexibility to change. The new configuration also results in 8 ‘premium business’ seats being added on Air France’s narrowbody aircraft. All in all, the changes allow Air France to bring down its lowest fares by 5 to 20 percent and its most expensive tickets by 19 to 29 percent. The airline also plans to simplify its catering and renegotiate working conditions with pilots and cabin crew. Air France estimates that the measures will result in a EUR500 (USD750) million improvement by 2011-12.

Meanwhile, British Airways already scrapped free meals, except breakfast, on its short-haul flights, which saves GBP22 (EUR25/USD36) million a year. After 10am, passengers on flights lasting less than two hours will be served only drinks and snacks. The airline is also considering a single-class cabin for flights in and out of London Gatwick, as business travel on this route has nearly disappeared. Business class might remain on short-haul flights to and from Heathrow, where they feed into BA’s long-haul service. Iberia, BA’s new merger partner, even intends to set up a new ‘lower cost’ feeder airline at its Madrid hub by 2011. It will also lay off all flight attendants above the age of 55, and wages are frozen for two years for all employees.

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